Does corporate social responsibility create shareholder value? The importance of long-term investors

Phuong-Anh Nguyen, Ambrus Kecskés and Sattar Mansi

Journal of Banking & Finance, 2020, vol. 112, issue C

Abstract: We study the effect of corporate social responsibility (CSR) on shareholder value. We argue that long-term investors can ensure that managers choose the amount of CSR that maximizes shareholder value. We find that long-term investors do increase the value to shareholders of CSR activities, not through higher cash flow but rather through lower cash flow risk. Following prior work, we use indexing by investors and state laws on stakeholder orientation for identification. Our findings suggest that CSR activities can create shareholder value as long as managers are properly monitored by long-term investors.

Keywords: Agency problems; Corporate governance; Monitoring; Managerial myopia; Investor horizons; Shareholders; Stakeholders; Corporate social responsibility; Investment; Intangibles; Valuation; Profitability; Volatility; Return; Risk (search for similar items in EconPapers)
JEL-codes: G12 G23 G31 G32 G34 L21 M14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (76)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:112:y:2020:i:c:s0378426617302273

DOI: 10.1016/j.jbankfin.2017.09.013

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